DMC/SandT/48/01
Re Kuzma Gnidash
Hong Kong High Court: Admiralty: Waung J: [2001] HKEC 929:
August 2001
Mr. Colin Wright, instructed by Messrs. Crump, for the plaintiff
Mr. Clifford Smith, instructed by Messrs. Clyde & Co., for
the Intervener
ADMIRALTY JURISDICTION: ACTIONS IN REM: HIGH COURT ORDINANCE
s.12A (h) AGREEMENT RELATING TO THE USE OF A SHIP: AGREEMENT TO DEPLOY SHIPS IN
CONTAINER TRADE
Summary
Claims by the managers of a Container Line against the
shipowners providing tonnage to the Line, relating to commissions earned on
freight and to payments for services rendered to the Line’s ships and for the
hire of containers, were held to be claims arising ‘out of an agreement
relating to …. the use of a ship’ within the meaning of section 12A(h) of
the High Court Ordinance of Hong Kong. The Admiralty jurisdiction of the Court
was therefore rightly invoked as regards an action in rem against the ‘Kuzma
Gnidash’.

DMC Category Rating: Confirmed

Facts
In April 1997, the plaintiffs, described as ‘operators of
container ships’ entered into an agreement with the defendants, Kamchatka
Shipping Co., the owners of certain container ships. The agreement provided for
the establishment of a container shipping line between Hong Kong, Chinese ports
and the Russian Far East port of Vostochny. Kamchatka were to provide the ships
required, whilst the plaintiffs were to be responsible for the commercial
deployment of the ships and the provision and management of the container fleet.
The plaintiffs were responsible for collecting freight and for paying for
services rendered by third parties to the ships in the Container Line. In
return, the plaintiffs were entitled to a 7.5% commission on the gross freight
and to reimbursement from Kamchatka of the payments to third parties.

Kamchatka’s ships were first deployed in the Container Line
service in about May 1997 but, in breach of contract, were progressively
withdrawn from the service over the period April 1998 to April 1999.

By the time of the action, the plaintiffs had claims for a)
earned but unpaid commission amounting to US$ 497,489, b) damages due to loss of
future commission amounting to US$ 310,101 and c) disbursements and liabilities
incurred on behalf of Kamchatka amounting to US$1,180,508.

The issue was whether these claims were claims sufficient to
found Admiralty jurisdiction under the relevant Hong Kong statute, the High
Court Ordinance of ……in particular under section 12A(h) of that Act, which
referred to ‘any claim arising out of any agreement relating to the carriage
of goods in a ship or to the use or hire of a ship’.

Judgment
The judge found that the nature of the Agreement was ‘to put
the defendant’s [Kamchatka] fleet … to better usage by going into the
Container Line. This is to be achieved by means of the proper management,
organisation and employment by the plaintiff of these container ships and
containers to be carried thereon. This Agreement is not any conventional
management agreement…. Take, for example the first vessel put into service of
the Container Line, the Nicolai Zhukov, which was admittedly owned at the time
of the Agreement by the defendant and [was] part of the defendant’s container
fleet referred to in the Agreement. Can it be said that the Agreement is an
agreement relating to the use of the Nicolai Zhukov? I believe, yes. It is not
necessary for the Agreement to provide for the plaintiff to use the Nicolai
Zhukov, whether physically or not. The usage required by section 12A(h) could be
that of the defendant. What is important is that the subject matter of the
Agreement must be on the use of Nicolai Zhukov. The whole object of the
Agreement is to put Nicolai Zhukov to an efficient Container Line use…. The
use of these ships is the object and at the heart of the Agreement.’

The judge then found that all three claims arose from the
Agreement and on that basis, arose from an agreement as to the use of a ship
within the meaning of section 12A(h) of the Act. In consequence, the Admiralty
jurisdiction of the court had been correctly invoked and judgment was given in
the plaintiff’s favour.

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